In my Book ‘When you are Super Rich who can you Trust?’ I make the point that if wealthy families fail to keep a check on their wealth it will sooner or later be eroded. From my experience, this tends to happen once the Settlor or wealth creator is incapacitated or dies and the erosion can come from a variety of sources.
Jeffrey (not his real name) is the brother in law of an oil baron Robert. He was close to his sister Margaret and their three children. Jeffrey was much younger than Margaret and she was Roberts second and much younger wife who he adored. Unexpectedly, Margaret contracted a rare form of cancer and after a short illness died. Jeffrey was distraught. He lost the will to live and he also died quite soon thereafter.
Robert had appointed Jeffrey, as the Protector of his trust, which held his many millions. As a Protector, he was given wide powers to appoint and remove beneficiaries. On the death of both Robert and Margaret, Jeffrey asked to see all the trust papers. He duly noted that he had unlimited power to remove the settlor’s children and grandchildren and appoint whoever he liked in their place. In the absence of a clause which said he could not appoint himself, he appointed himself as the sole beneficiary and removed all his nephews and neices. I was brought in my Robert’s eldest daughter, who was surprised that her maintenance payments had ceased.
For the trust buffs among you, it was likely that Jeffrey’s appointment was ‘personal’l. He therefore did not have to exercise his powers for the benefit of his nieces and nephews! If his appointment had been ‘professional’, his appointment would have been ‘fiduciary’ which means he could only exercise his powers in the best interests of his nephews and nieces.
We called a meeting with Jeffrey and the beneficiaries he had removed and Jeffrey was persuaded to reinstate them as beneficiaries and the trustees were told to continue to pay the maintenance payments – they were lucky! They are still arguing about their entitlement to capital.
In another case, the Settlor, Rufus (not his real name), became incapacitated and was unable to keep in touch with the trustees of his trust, who were aware of his incapacity. His wife Josie approached me, to say that she had been in touch with the trustees, who were refusing to answer her calls or speak to her. Josie showed me a copy of the trust deed. It was clear that on her husband’s death, she and her children would be the beneficiaries, but not until then. There was no clause stipulating what should happen if the Settlor became incapacitated.
On behalf of Josie we were able to obtain a copy of the trust accounts and documents. Since the incapacity of her husband Rufus, the Trustees had exercised their powers to increase their remuneration. By the time we got involved their fee had gone up from £50,000, to well over £200,000 in just four years. We agreed to indemnify them in exchange for their immediate resignation and we set up a structure for Josie which avoided this from happening again.
The third case, involved a Trustee who had complete control over the financial activities of the trust. Following the death of the Settlor, Serge, his widow Sally, came to see me, she was very concerned. Although her monthly allowance had continued to be paid since the death of Serge, the Trustees were not responding to her request for trust accounts.
Once again, we got involved and were able to obtain trust accounts. When we sat down with Sally and the accounts, it soon became clear that the Trustees had sold several properties at what would appear to be at an undervalue. We made some enquiries. The sales had been made to a company owned by the trustee company which had then sold on the properties at a 50% mark up.
In this case, we told the trustees that we would report them to their local ombudsman to have their license removed – which would put them out of business, if they did not account to the trust for the monies they made on the onward sale, which they did.
In my book, I offer some advice as to what wealthy families should do to avoid being ripped off. The first and most obvious tip is do not put too much trust in just one person – at all levels there must be checks and balances, which I call good governance.
If you would like to buy my book ‘When you are Super Rich who can you Trust?’ or ‘How to win business from Private Clients,’ go to my website www.garnhamfos.com or Amazon, or if you would like a meeting to discuss your concerns please contact me on firstname.lastname@example.org or call 020 3740 7422